In case you’re a CEO hoping to present your inventory a lift over time, you could need to begin mentioning “development” and “enlargement” extra usually on earnings calls.
Shares of firms with chief executives who made liberal use of optimistic phrases to explain financials throughout earnings convention calls outperformed these at companies with extra reserved CEOs, generally by as a lot as 9% per yr, S&P International Market Intelligence present in a brand new examine.
“Traditionally, corporations whose executives referenced essentially the most cases of i) revenue- ii) earnings- or iii) profitability-related subjects in a directionally optimistic mild outperformed their most excessive counterparts,” S&P’s Frank Zhao wrote in January.
S&P’s Quantamental Analysis group used proprietary textual content analytics expertise to gauge the tone, complexity, frequency of mentions, and transparency of greater than 2,400 firms’ earnings name transcripts from January 2008 by December 2017.
They then in contrast the efficiency of long-short inventory portfolios primarily based on how continuously administration used optimistic descriptors to characterize earnings outcomes.
Zhao and his group discovered that shares of firms with CEOs who most frequently used buoyant vocabulary to explain income, earnings or profitability outperformed a long-short portfolio of shares whose CEOs have been the least apt to make use of gilded vocabulary by 9.16%, 8.6% and 6.76%,…